FREDDI:

Financing REDD+
and Managing Its
Risks in Indonesia
Agus P. Sari | agus.sari@santalaya.com
Chair | Working Group on Funding Instruments |
Presidential Task Force on REDD+

Bogor, Indonesia | REDD+ Architectural Design
April 18, 2013
National
Commitment

Reduction of emissions of
greenhouse gases by
26 41 percent
And
continue to grow the
economy by
7 percent
Sectoral targets under the RAN-GRK
Forestry and peat,
1.039, 87%
Waste
Management,
0.078, 7%
Energy and
transportation,
0.056, 5%
Agriculture, 0.011,
1%
Industry, 0.005,
0%
In gigatons (gt, billion tons), and in percentage
The five pillars of the
National REDD+ Strategy
Legal review, reform, and enforcement.
Institutional setting and strengthening.
Awareness raising and paradigm shifting.
Stakeholder engagement.
Strategic programs for conservation,
rehabilitation, enhancement of forest
cover, land swap, etc.
Assuming a $10 billion mobilization target: the
prominent role of the private sector
Norway, 1
Other public
funding, 2
Private funding,
7
Norway Other public funding Private funding
Fund mobilization: increasing the role of
domestic private sector
Changing the financing paradigm from budget to investments.
Expanding the sources of funding:
Foreign public funds other than that from the Government of Norway.
Foreign private investments.
Domestic private investments.
A need to recognize ecological services certificates as asset classes.
A need to form REDD+ commercially.
Foreign
Domestic
Private Public
Private Public
Private
Public
An innovative structure:
three financing modalities
Modality 1: Grants
Consist of Small and Main Grants, to be
established first. Most of the utilization is
for readiness, infrastructure, and non-
carbon performances (enabling conditions).
Modality 2: Investments
Being designed. Returns are expected in
terms of monetary and performance units.
Activated when readiness and capacity are
in place.
Modality 3: Trade Intermediary
Being designed. Returns are expected in
terms of performance units. Activated
once MRV instruments are in place.
FREDDI: a fund of funds.
The Trust Fund for REDD+ in Indonesia,
FREDDI, is a fund of funds. It is a fund
that invests in other funds.

It is being established using Presidential
Regulation No. 80/2011 on Trust Fund as
a public trust fund.

The funds underneath FREDDI, the
subsidiary funds, can be special-purpose
vehicle companies, fund managers, or
collective investment agreements.

These subsidiary funds can form joint
ventures with other funds or other
companies, among others, to use it as
disbursement vehicles and as leverage to
mobilize other funds.
Partner Agencies
(for the Main Grant)
Executing
Agencies
Small-Grant
Managers
Grants for Program,
Projects, Activities
Grants for Small
Program, Projects,
Activities
Disbursement and
Investment
Committee
Governing Structure

Trustee

REDD+
Agency
The structure of
FREDDI in the
funding instruments
Safeguard
Committee
Secretariat

Board of Trustee
FREDDI
Supporting
Facility
Safeguards and benefit sharing mechanism to
ensure community benefits
REDD+ must benefit the people.
Safeguards and benefit sharing mechanisms are
two sides of the same coin.
Safeguards serve to avoid REDD+ initiative to run
against other social, environmental, and financial
objectives.
Benefit sharing mechanism serves to ensure that
benefits reach the community.
PRISAI: a participatory consultative process to develop
a strong and workable safeguard protocol
Opening
National
Consultation
Sectoral Group
Discussions
Concluding
National
Consultation
Opening
Provincial
Consultation
Concluding
Provincial
Consultation
Sectoral Group
Discussions
PRISAI, the Principles, Criteria, and Indicators for REDD+ Safeguards in Indonesia, has been developed
through a bottom-up manner with involvement of key stakeholders at the national and provincial levels. The
provincial process will provide a provincial context to the process.

A process has been started to merge the process to develop PRISAI and the process to develop a UNFCCC-
related Safeguard Information System (SIS) in the Ministry of Forestry.

A process is also started to compare and harmonize safeguard protocols of other key institutions to possibly
form a mutual recognition mechanism among the existing safeguard protocols. They include those of the
WB, the ADB, the IFC, etc.
Implementation of PRISAI
Pre-Implementation: FPIC

Implementation: Monitoring, improvement,
problem-solving.

Report, evaluation, complaint, grievance,
conflict management.

NATIONAL
FUND
PROVINCIAL
BENEFICIA-
RIES
OVERSEAS
PAYMENTS
NATIONAL
PAYMENTS
PROVINCIAL
PAYMENTS
NATIONAL
BENEFICIA-
RIES
Flows of benefits
Paradigm shift that guides the principles for
benefit-sharing and incentive mechanisms
Community as disturbed
neighbors of an REDD+
Project that needs to be
bribed through cash-
distribution
Community as a part of,
and co-owners of the
project, being inside the
project boundary,
sharing responsibility as
well as benefits
Benefits being defined
almost entirely as cash
distribution.
Benefits being defined as
well-being, happiness,
sustainability, with
fulfilled social needs.
Benefits being defined
almost entirely as
derived from carbon.
Benefits being defined as
carbon and other social
and ecological services.
Redefinition of project boundaries
The use of landscape and jurisdictional approach in
defining projects. Project boundaries include projects,
people, public and private sectors.
Key pilot cases: Kapuas Hulu in West Kalimantan, and Berau
and West Kutai in East Kalimantan.
REDD+ as a productive sector, a source of growth and
income, contributing to the green development plan of
the regions.
Governance.
Community co-owns projects, not only in financial terms.
Community having access to decisionmaking process in
REDD+.




Beyond cash
As a part of the green development plan of
the region, there has to be a transfer of capital
from REDD+ projects to sustainable
development.
Benefit should last beyond project periods.
Benefits are reinvested in social, environmental,
and physical capital for sustainability.
Beyond carbon
Benefits come not only from carbon, although it
is a good start.
Other ecological services such as water,
ecotourism, and biodiversity-based commodities.
Other social and cultural services.
Payments for services from forests other than
carbon need to be calculated and made, at the
right scale and scope, by and to the right
parties.
Landscape and Jurisdictional
Approach
Departure from concession-based and project
based into landscape-based.

Allowing multi-stakeholder inclusivity.

Allowing for leakage control.

Allowing for more integrated benefit sharing
mechanism
REDD+ as a part of green economic
development in the region
ECOSYSTEM
SERVICES
FINANCE
COMMODITIES
and others
Carbon, biodiversity, water,
flood control, etc.
Timber, non-timber, coffee,
plantations-based, sago,
palm sugar, etc.
Collective investments, bonds,
impact bonds, etc.
Key design elements
Governance.
Planning, implementation, conflict management
Buy-ins.
Especially process-oriented.
Fund management.
Development planning and implementation.
Commerciality.
Sustainability.

Going forward
Use existing channels for distribution, whenever
appropriate.
In Indonesia: PNPM, grant-making institutions, banks, credit
unions.
Create new ones, whenever appropriate.
Establishment of Provincial Ecosystem Services Funds.
Joint ventures with funds and fund managers.
Do it as a part of a green development plan of the
region. This includes poverty alleviation and sustainable
livelihoods.
Ensure community access.
Shield national activities from international market risks.
Thank you
More information:
www.satgasreddplus.org
info@satgasreddplus.org